After Kramer hears that the bank on the corner is offering $100 to anyone that isn’t greeted with a “hello” when they enter the building, he goes down to the bank to check out the deal. When Jim the teller greets him with a “hey,” Kramer argues that the bank now owes him $100. Is this $100 promotional offer a binding contract on the bank? If it is, does “hey” satisfy the requirements of the contract, or must the bank teller greet customers specifically with a “hello?”
Since Kramer is not being asked to make any promise by the bank, the bank is making what’s known as a unilateral contract with Kramer. A unilateral contract is one where one party pays a second party to perform a certain act, but that second party is under no obligation to do so. Rewards and contests are prime examples of unilateral contracts; a contestant chooses to perform. However, the contract offeror is bound by the contract if the contestant performs the terms of the contract.
Here, Kramer is under no obligation to go to the bank, but if he does and a teller does not greet him with a “hello” then the bank is bound by it’s $100 offer.
The problem here is that Kramer need not actually do anything at all to receive the $100. Rather, it is the bank teller that must fail to do something in order for Kramer to get the reward. There is no “performance” for Kramer under the contract. Since according to the terms of the bank’s promotion there is no “performance” by Kramer, it is unlikely that a court will even view this as a legally enforceable unilateral contract. All contracts require some form of consideration. In a unilateral contract, consideration comes in the form of the performance by the second party, which would be Kramer in this case. Here, since Kramer need not actually do anything to get $100, there is no consideration. Therefore, it is unlikely that a court will view this a legally binding contract, and Kramer is not legally entitled under contract law to the bank’s $100.
(For a primer on contract formation, see “The Puffy Shirts.”)
Even if a court were to have found that a binding contract had been made between the bank and Kramer, it is unlikely that a court would find that the bank had breached the contract when Jim the teller greeted Kramer with “hey” instead of “hello.” When a contract is silent as to what constitutes a breach, courts can analyze an alleged breach as either a “material breach” or as a “substantial performance.” A “material breach” means that the contract has been breached and a court can order a remedy, while “substantial performance” means that the although the contract has been breached, the breach is so insignificant that courts will still find that the contract has legally been performed. In 1921, in a decision written by future supreme court justice Benjamin Cardozo, the New York Court of Appeals ruled that insignificant breaches of a contract by a party should be counted as substantial performance of the contract by that party. Here, it is likely that a court would find that the Jim’s “hey” is substantial performance of the bank’s obligation. After all, it is a greeting that starts with an “h.” Other tellers at the bank think “how you doin’,” or “what’s happening,” or “what’s up,” are acceptable greetings. Even Jeannie, thinks “hey” is the same thing as “hello.” Therefore, even if this were found to be a binding contract, a court would likely find that the bank has performed its obligation under the contract.
Ultimately though, it’s unlikely that a court would even find that the bank had made a real offer to Kramer. In “The Pepsi Points” case of 1999, a Federal Court ruled that some advertisements are so beyond the scope of reality that no reasonable person would find that a real offer had been made by a company. And while Kramer may not be a reasonable person, a court may say that the bank was never serious about giving away $100, rather the promotion was just puffery designed to show that the bank took customer relations seriously.
No matter how you analyze it, it doesn’t seem like the bank owes Kramer anything for it’s teller failing to greet Kramer with a “hello.” By even getting the bank to give him $20 in a settlement deal, Kramer, as usual, somehow falls ass backwards into money.
But isn’t Kramer entering the building a “performance” on his part?
I don’t think so. Kramer still doesn’t have an obligation really under the contract. Entering the building only creates the situation where the bank has to then perform with a greeting of “hello,” but Kramer still really doesn’t have to do anything active.
That’s a good point. He does take an action and must physically head down to the bank. Still, it’s hard to see that as anything significant enough to count as “performance.” But that’s the beauty of this, good arguments on both sides!
I should say that I have no legal training whatsoever, but to me the act of entering the bank seems like it should count as Kramer’s fulfilling of his half of a contract.
To use reductio ad absurdum, suppose that the bank weren’t in New York, but in a remote unincorporated territory, and that they used their $100 offer to entice people to travel the arduous distance to their location. By requiring a substantial effort on Kramer’s part, wouldn’t they be entering into a binding agreement?
And that’s the problem I see here: it doesn’t seem too sound to hypothesize on the amount of effort required by Kramer to get to the bank, and to base a ruling on that. We don’t know anything about Kramer’s travel to the bank; perhaps he’s a shut-in, and leaving his apartment requires monumental effort? Maybe he had to leave a poker game with Bob Sacamano, one in which he stood to profit greatly?
Btw I love this blog! (~:
Thanks for the comment! This is certainly the most controversial post, and yeh it’s a difficult line to figure out exactly who is the one performing under this contract. Thanks for reading, we’ll have another post out soon!
Entering the bank exposes him to their marketing, look and feel, operations, etc and makes him much more likely to patronize the bank. This is something companies pay for every day. Car dealers offer gifts for stopping in all the time, $20 gift cards, free dinners, etc. For just stopping in.
Billions of dollars are transacted yearly based on the same premise, businesses offer to pay Google $1 to $200 for every person who clicks on an ad on Google for their website. No other consideration or performance is necessary for Google to be entitled to the money.
This would make me conclude that it isn’t puffery, but a common business practice, just the bank decided to cut out the middleman and offer to pay customers with either a very specific greeting or $100. The bank saves money by not paying everyone, but should still be required to full fill either the proper greeting or the cash.
I also take issue with the thought that it is substantial performance. If they had offered a toaster for coming in and only gave out coffee makers and said it’s a small appliance, it’s basically the same thing. I don’t think that would be substantial performance, neither do I think an informal, substantially less caring greeting is sufficient. Especially when the contract terms are so small and specific. It’s not like they failed to perform 1/10th of the contract or some small insignificant part, they failed to perform either of the only two clauses of the contract.
Thanks for the comments! Sorry for the delay in responding (studying for the bar right now). This post has definitely generated the most comments and this is some amazing analysis. I think we may write an additional post on this topic outlining some of these opposing lines of thoughts. Thanks for reading!! And feel free to send in any other analysis on past or additional articles.